Natural Gas News: Futures Climb as Weather Models Trigger Demand Spike

Natural Gas Prices Jump as Cold Weather Forecasts Fuel Demand Outlook

Natural gas futures surged Friday, with the continuous contract hitting an 8.5-month high, as traders reacted to a shift in U.S. weather models pointing to below-normal temperatures in early December.

The latest updates from the Commodity Weather Group show intensified cold in key heating regions, including the Northeast and Great Lakes, driving expectations of higher residential and commercial heating demand.

On Friday, January Natural Gas Futures settled at $4.850, up $0.292 or +6.41%.

Is the Weather Forecast the Game-Changer for Winter Demand?

The sudden turn in short-term weather expectations has reignited bullish sentiment. Forecasts now call for below-normal temperatures in the first week of December across heavily populated regions. This cold snap is likely to push up consumption, just as early winter heating demand begins to build. Power sector usage is also showing signs of strength, with U.S. lower-48 electricity output rising 5.33% y/y in the week ending November 15, according to the Edison Electric Institute.

Supply Growth Remains a Limiting Factor

Despite the weather-driven price rally, structural headwinds remain in place. U.S. dry gas production hit a record 113.4 bcf/day on Friday, up 8.3% y/y, according to BNEF. The EIA also raised its 2025 production forecast to 107.67 bcf/day, reflecting confidence in continued supply expansion.

Rig activity confirms the trend: Baker Hughes reported a rise of three active gas rigs last week, bringing the total to 130 — a 2.25-year high. The steady build in supply continues to cap long-term upside, despite short-term demand optimism.

Storage Data Signals Adequate Supply Coverage

Last week’s EIA storage report showed a larger-than-expected withdrawal of 11 bcf, compared to consensus estimates of 9 bcf. However, inventories remain healthy, sitting 4.2% above the five-year average, despite being down 0.8% y/y.

This suggests the market is well-supplied heading into the cold season. On a global scale, European gas storage remains robust at 77% capacity, though down from the five-year average of 88%, offering some additional price support.

LNG Export Strength Adds Underlying Support

LNG exports continue to absorb excess supply, with flows to U.S. terminals at 18.5 bcf/day, up 4.4% w/w. Continued strong export demand may help tighten balances in the coming weeks, particularly if cold weather persists and domestic consumption accelerates.

What Are the Technical Signals Saying?

January natural gas futures settled above their 200-day moving average at $4.732, which now acts as immediate support. If prices break above the November 13 high of $4.881, the next upside pivot comes in at $4.953. A move beyond that level would target the June 20 high at $5.341.

On the downside, additional support is seen at $4.627, with stronger trend support resting at the 50-day moving average near $4.372.

Market Forecast: Bullish Short-Term Bias

With colder weather forecasts front and center, natural gas is likely to hold a bullish tone in the near term. Rising demand from heating and electricity generation, coupled with strong LNG flows and favorable technical signals, supports the case for further upside. However, elevated production and healthy storage levels remain potential caps on sustained rallies.

More Information in our Economic Calendar.